Treasury Finds Belarus-Based Bank Is A Money Laundering Concern

The U.S. Treasury Department issued a finding Tuesday that named a Belarus-based bank as a “primary money-laundering concern,” which potentially can cut the bank off entirely from the U.S. financial system.

JSC CredexBank’s uncertain ownership, suspicious spikes in transaction activity and a lack of transparency about its customers put the U.S. financial system at risk if it deals with the bank, Treasury said.

“This action seeks to protect the U.S. financial system from a foreign financial institution whose highly suspicious transaction patterns and pervasive lack of transparency make it virtually impossible to discern whether the bank is engaged in any legitimate business,” said David Cohen, undersecretary of Treasury for terrorism and financial intelligence, in a statement.

Belarus was notified ahead of the release of the finding, Cohen told reporters on a conference call. Treasury made the finding under Section 311 of the Patriot Act. The little-used finding doesn’t freeze Credex’s assets, but it is designed to put the fear of a total block from the U.S. financial system in the mind of anyone who does business with a designated entity.

In addition to Tuesday’s finding, Treasury issued a proposed rule governing how U.S. financial institutions should handle Credex. The proposals include recordkeeping requirements and reporting certain transactions involving the bank, including attempts at making transactions. It would also prohibit U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for Credex.

The proposed rule has a 60-day comment period, while the finding about Credex goes into effect immediately.

Concerns Treasury has with Credex deal with ownership and suspicious activity. Cohen said on the call that Credex had engaged in “highly suspicious” transactions, but didn’t say it violated any sanctions or name anyone behind its operations.

Credex’s ownership has passed from one shell company to another since its formation in 2001, Treasury said. Its current owner, Fribourg, Switzerland-based Vicpart Holding SA, has no physical presence and shares the same address as more than 200 other companies, Treasury said. Furthermore, Vicpart appears to be a “shelf” company in that it laid dormant until a few months before purchasing Credex in 2009, Treasury said.

The bank also has a pattern of spikes in transactional activity in high-risk jurisdictions, indicating a pattern of money laundering, Cohen said. He elaborated on a two-month period in 2010 when Credex transferred more than $1 billion to hundreds of shell corporations in multiple jurisdictions, a large amount given that it ranks 22nd largest in assets out of the 31 commercial banks in Belarus.

Though Credex has no direct correspondence with the U.S. financial system, it gained indirect access through “nested accounts” via European banks and money-service businesses, Treasury said. The majority of its correspondent banking relationships are with other Belorussian banks, and it maintains correspondent relationships with Russian, Latvian, German and Austrian banks.

On the call with reporters, Cohen stressed the Obama administration’s efforts at trying to get financial institutions to identify beneficial owners, and proposed legislation it supports that would mandate a firm’s owners to be disclosed upon incorporation.

Tuesday’s finding focuses on Credex, but it shines a light on how shell companies and shadow activities pose risks to the U.S. financial system, Cohen said.

Add a Comment

About Corruption Currents

Corruption Currents, The Wall Street Journal’s corruption blog, digs into the ever-present and ever-changing world of corporate corruption. It is a source of news, analysis and commentary for those who earn a living by finding corruption or by avoiding it. Corruption Currents is written by Christopher. M. Matthews and Sam Rubenfeld and edited by Nick Elliott.

Some posts in Corruption Currents are free but others, denoted by a key symbol, require a subscription.